Coinbase’s (COIN) $2.9 billion acquisition of Deribit will be a tipping point for the company, pushing the U.S.-based exchange into direct competition with global heavyweights like Binance, Wall Street analysts wrote on Thursday.
The massive deal is more than just a platform expansion; it’s a paradigm shift for the exchange and trading industry. According to the analysts, the deal signals the start of a new consolidation cycle in the crypto trading industry, as smaller exchanges face pressure and TradFi firms look to expand further into the sector.
Read more: In $2.9B Deal, Coinbase Buys Deribit to Expand in U.S. Crypto Options Market
Deribit controls 85% of the global crypto options market and reported $1.2 trillion in trading volume last year. By absorbing it, Coinbase becomes the world’s largest crypto derivatives platform by open interest and options activity, KeyBanc wrote in a report.
The deal also plugs a geographic gap, expanding Coinbase’s presence overseas, where just 20% of its revenue currently originates, according to Barclay’s Benjamin Buddish.
Oppenheimer called it a “legitimate threat” to dominant exchanges, noting that Coinbase’s public status gave it the ability to fund the acquisition using stock, an option not available to most private firms. That advantage, combined with $8.5 billion in cash on hand, could turn Coinbase into the most aggressive consolidator in the space.
Options markets are attractive in part because they offer steady volumes across market cycles. Barclays estimated Deribit’s 2024 revenue between $425 million and $450 million, suggesting a healthy earnings contribution to Coinbase’s bottom line.
KeyBanc also highlighted the strategic fit, calling Deribit’s institutional user base and international footprint a natural extension of Coinbase’s futures and spot products.
Regulatory approval for the deal remains pending, but analysts expect Coinbase to provide more color during its first-quarter earnings report on Thursday.
The exchange is expected to miss Street expectations for earnings in the first quarter as markets were rattled by economic uncertainty. Shares of COIN were up 6.58% on the day, while bitcoin rose 4.31%.
Read more: Coinbase Earnings Pain Likely as Retail Activity Slumps, Wall Street Analysts Warn